US Inflation Drops to 2.9%, Lower Than Expected

July US Inflation Data:

– Consumer Price Index (CPI):
  – Year-on-Year (YoY): 2.9% (Expected: 3%)
  – Month-on-Month (MoM): 0.2% (Expected: 0.2%)

– Core CPI (excluding food and energy):
  – Year-on-Year (YoY): 3.2% (Expected: 3.2%)
  – Month-on-Month (MoM): 0.2% (Expected: 0.2%)

ANALYST: The inflation numbers, with core and overall monthly figures matching expectations and the yearly figure slightly below forecasts, are mostly in line with market predictions.

TRADERS TRIMS FED RATE-CUT EXPECTATIONS AFTER CPI DATA

The yield on 10-year U.S. Treasury notes went up slightly after the CPI report, staying around 3.856%.

The yield on 2-year U.S. Treasury notes rose after the inflation data, now at 3.97%.

Key Points:
– July’s CPI inflation dropped to 2.9%, below the 3.0% estimate.
– Core CPI was 3.2%, matching expectations.
– This is the first time CPI has been below 3.0% since March 2021.
– A rate cut is expected next month, the first since 2020.
– With CPI and PPI decreasing, there’s a question about whether the Fed can prevent a recession.

While the Consumer Price Index (CPI) inflation rate for July stands at 2.9%, many essential items are experiencing much higher inflation rates:

1. Car Insurance: 18.6%
2. Transportation: 8.8%
3. Hospital Services: 6.1%
4. Homeowner Costs: 5.3%
5. Rent: 5.1%
6. Electricity: 4.9%
7. Car Repairs: 4.6%
8. Food Away From Home: 4.1%

Since January 2020, the US Dollar has lost 25% of its purchasing power. Inflation has been compounding for three consecutive years, with prices continuing to rise.

Post-CPI data, the probabilities on Polymarket now indicate a 68% chance of a 25bps rate cut, up from 63% before the data, and a 26% chance of a 50bps cut, down from 33% previously.

Update

President Biden stated that prices are still excessively high and criticized major corporations for not taking sufficient action to lower them.